Putnam
Global Equity
Fund*
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
2-29-00
*Formerly Putnam Diversified Equity Trust
[SCALE LOGO OMITTED]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
This is the last letter to you and the other shareholders of Putnam Global
Equity Fund that I will be signing. After more than 30 years as Chairman
of the Trustees and President of the Putnam Funds, the time has come for
me to step aside. In June, John Hill will become Chairman. John is
currently an independent Trustee and has served on the board for the past
14 years. In addition, my son, George Putnam, III, will take on the role
of President. I am confident that the leadership of the funds will be in
exceptionally strong hands.
I will become Chairman Emeritus, remain a Putnam shareholder, and stay in
close touch with the funds. It has been my privilege to serve you.
In one final piece of news, I am pleased to announce the addition of
Michael K. Arends to your fund's management team. Before joining Putnam in
1997, Mike was with Phoenix Duff and Phelps, Kemper Financial Services,
Institutional Capital Corporation, and Mathers and Company. He has 22
years of investment experience.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
April 19, 2000
Report from the Fund Managers
Paul C. Warren
Justin M. Scott
Michael Stack
Omid Kamshad
Michael K. Arends
Putnam Global Equity Fund ended its first fiscal year of the new
millennium with outstanding results. True global flexibility in the
pursuit of stock investments that offer both attractive valuations and
solid growth potential has enabled your fund to outperform its three
benchmark indexes for the 12-month period. Furthermore the fund's
multidimensional investment process allowed it to produce attractive
risk-adjusted returns for the three- and five-year periods ended March 31,
2000, as indicated by Morningstar, an independent mutual fund reporting
service.
Total return for 12 months ended 2/29/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- --------------------------------------------------------------------------
63.14% 53.76% 62.03% 57.03% 61.94% 60.94% 62.48% 56.78%
- --------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance calculation
methods begin on page 6.
* PORTFOLIO FIRES ON ALL CYLINDERS
Putnam Global Equity Fund's management process involves a rigorous
research-intensive approach that drives the portfolio's performance
potential. Just as an automobile engine has a set number of pistons
generating horsepower, your fund's performance is driven by an investment
strategy that involves three distinct components: a top-down macro
analysis of country markets, a similar in-depth study of industry sectors,
and a bottom-up evaluation of individual stocks worldwide. To varying
degrees, all three portfolio pistons -- the countries, industries, and
companies we chose to emphasize -- kept the fund's performance running
smoothly in an upward direction during the period. Stock selection had the
greatest positive impact, with sector weighting decisions running a close
second. Exposure to country markets such as the United States, Japan,
France, the United Kingdom, and Germany, proved positive as well but to a
much lesser extent.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Telecommunications 12.6%
Electronics 8.1%
Software 7.3%
Broadcasting 7.0%
Communications
equipment 6.2%
Footnote reads:
*Based on net assets as of 2/29/00. Holdings will vary over time.
* M&A ACTIVITY AND GLOBAL SYNCHRONIZATION CREATE INVESTMENT PARADIGM SHIFT
The dramatic and fast-paced way in which world markets are currently
evolving appears to have changed the global investment landscape, if not
permanently then at least for the near term. The synchronization of
recovery in the world's economies and increased global merger and
acquisition activity, combined with the technology boom, have caused the
trajectory of several industries and many companies to transcend regional
influences.
In the past, choosing the right country markets was paramount to the
successful performance of individual stocks within a portfolio. Today that
is not necessarily so. Now that the M&A trend that dominated the U.S.
market for the past decade has gone global, megacapitalization
multinational corporations are emerging. These companies have no
geographic boundaries. For example, Vodafone Group Plc. does business in
Germany, but it is no longer a German company. Rather, it is a global
telecom operator with major interests in Germany, the United Kingdom, and
the United States. While these holdings were held in the portfolio during
the fiscal year, they were no longer part of the portfolio as of February
29, 2000.
Morningstar, Inc., an independent rating agency, gave the fund's class A
shares its highest rating of 5 out of 5 stars for risk-adjusted performance
for the 3- and 5-year periods ended March 31, 2000. Of the 1,124 international
equity funds rated, only the top 10% received 5 stars.
Past performance is not indicative of future results. Morningstar ratings
reflect risk-adjusted performance through 3/31/00 and are subject to change
every month. Morningstar ratings are calculated from a fund's 3-year return
(with fee adjustment) in excess of 90-day Treasury bill returns and a risk
factor that reflects performance below 90-day Treasury bill returns. For 3-
and 5-year performance, the fund received 5 stars. There were 1,124 and 672
international equity funds rated; the top 10% received 5 stars, the next 22.5%
receive 4 stars. Performance of other share classes will vary.
Because of this trend, the largest 110 companies in the world account for
more than half the investable market capitalization of all companies. In
other words, company selection has become nearly as important as country
market selection.
Regional forces also have had a growing measure of influence on individual
stock performance. These forces include Europe's Economic and Monetary
Union and the wave of corporate restructurings intended to increase
shareholder value that is sweeping across Europe and, more recently,
Japan. Of course, industries and companies that have a decidedly regional
flavor will always exist. Retail is one example. In such cases, the
political, economic, and social backdrop of a particular country will
continue to be critical determining factors in certain stock investment
decisions.
* TECHNOLOGY, TELECOMMUNICATIONS, AND MEDIA NAMES CONTRIBUTE STRONGLY
Industry sectors and, more importantly, companies that are representative
of the "new economy" dominated the portfolio throughout the fiscal year.
We actively chose to overweight issues in the technology,
telecommunications, and media sectors relative to the fund's benchmark.
The desire to communicate faster and more efficiently, whether at work or
play, is driving technology expenditure and creating what we believe to be
a secular trend. In order to remain competitive, companies must invest in
technology. This, in turn, is bolstering worldwide demand for personal
computers, mobile telephones, and telecommunications and Internet
infrastructure.
Across Europe and in Japan, we sought out technology companies as well as
fixed-line and wireless telecommunications providers that exhibit strong
pricing power, are recognized leaders in product innovation, and are
focused on earning a high return on capital. Holdings that have performed
extremely well for the fund include Oracle Corp., Nokia Ojy, Cable and
Wireless Plc, Sun Microsystems, Inc., Bouygues S.A., Telecom Italia Mobile
SpA, Motorola, Inc., Telefonica S.A. and Nippon Television Network Corp.
The tech mania also has allowed many semiconductor companies to experience
booming demand. We added several new holdings that are poised to
appreciate, including LSI Logic Corp. and Altera. While these holdings,
along with others discussed in this report, were viewed favorably at the
end of the period, all are subject to review in accordance with the fund's
investment strategy and may vary in the future.
"New economy" stocks -- the buzz of markets around the world
With the millennium came another historic event: the emergence of a new era in
global economic growth. Popularly coined the "new economy" in the U.S., the
current leg of expansion in the world's economies, it is believed, will stem a
great deal from innovative information technology. The Internet is certainly
at the forefront of that technology. "The evolution of the Internet as a
pervasive phenomenon means that the traditional factors of production --
capital and skilled labor -- are no longer the main determinants of the power
of an economy. Now, economic potential is increasingly linked to the ability
to control and manipulate information."*
The growing global appetite for information technology has spawned an
increasing number of high-growth industries and companies that have
demonstrated the ability to perform independently of traditional market forces
such as interest rate movements or historic business cycles -- hence the new
economy moniker. Our disciplined valuation approach -- in which we compare a
stock's current price to its potential relative payback - has enabled the fund
to capitalize on the dynamic growth potential of many new economy stocks.
*Business Week, "The Internet Economy: The World's Next Growth Engine",
October 4, 1999
Another area in which the fund has considerable global exposure is media.
Economic recovery in nations around the world bodes well for advertising
while the rapid rise of the Internet stands to benefit television stations
as demand for content increases. Advertisers such as Havas Advertising,
WPP, and Publicis are all generating high revenues from global
multinational clients intent on raising their worldwide brand awareness.
ProSieban Media AG, TF1 (Television Francaise), AT&T Liberty Media, and
Carlton Communications are all contributing their part to the convergence
of old and new media.
We underweighted stocks in the financial, pharmaceutical, and industrial
materials arenas. Rising global interest rates, a diminishing stream of
new blockbuster drugs, and an increasingly challenging pricing environment
were our primary reasons for selling such stocks as Merck and Union
Carbide.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Oracle Corp.
United States
Software
Motorola, Inc.
United States
Electronic
Vodafone Group Plc
United Kingdom
Telecommunications
Sony Corp.
Japan
Consumer
AT&T Liberty Media
United States
Cable television
NTT Mobile Communications
Luxembourg
Telephone
Applied Materials, Inc.
United States
Semiconductors
Cable & Wireless Plc
United Kingdom
Telecommunications
Philips Electronics N.V.
Netherlands
Technology
Nokia Oyj
Finland
Communications equipment
Footnote reads:
These holdings represent 22.9% of the fund's net assets as of 2/29/00.
Portfolio holdings will vary over time.
* OUTLOOK: EMPHASIZE MORE OF SAME
As we enter fiscal 2001, we will continue to target technology and telecom
companies that we believe are positioned to benefit from the fundamental
change in business that is taking place in our world today. We aim to
continue identifying companies in Europe, Japan, and the United States
that are implementing genuine restructuring initiatives as well as those
whose products and services are likely to be in demand as world economies
recover. We are mindful that rising interest rates and somewhat extended
valuations could lead to bouts of volatility in the months ahead.
Nevertheless, we are confident that the fund's three-dimensional
investment process will enable us to successfully pinpoint opportunities
whatever challenges lie ahead.
The views expressed here are exclusively those of Putnam Management. They
are not meant as investment advice. Although the described holdings were
viewed favorably as of 2/29/00, there is no guarantee the fund will
continue to hold these securities in the future. International investing
involves certain risks, such as currency fluctuations, economic
instability, and political developments.
Performance summary
This section provides information about your fund's performance, which should
always be considered in light of its investment strategy. Putnam Global Equity
Fund seeks capital appreciation by investing primarily in common stocks of
companies located in foreign countries and in the United States.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 2/29/00
Class A Class B Class C Class M
(inception dates) (7/1/94) (7/1/94) (2/1/99) (7/3/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 63.14% 53.76% 62.03% 57.03% 61.94% 60.94% 62.48% 56.78%
- -------------------------------------------------------------------------------------------
5 years 259.74 239.01 249.21 247.21 248.48 248.48 253.54 241.19
Annual average 29.18 27.66 28.42 28.27 28.36 28.36 28.73 27.82
- -------------------------------------------------------------------------------------------
Life of fund 274.58 252.99 262.38 261.38 261.65 261.65 267.68 254.77
Annual average 26.28 24.96 25.54 25.48 25.50 25.50 25.87 25.07
- -------------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 2/29/00
MSCI Consumer
Standard & Poor's MSCI EAFE All-Country price
500 Index Index World Index index
- ---------------------------------------------------------------------------
1 year 11.73% 25.45% 21.68% 3.16%
- ---------------------------------------------------------------------------
5 years 206.93 83.41 129.01 12.58
Annual average 25.13 12.89 18.02 2.40
- ---------------------------------------------------------------------------
Life of fund 243.11 74.23 130.72 14.86
Annual average 24.30 10.29 15.90 2.48
- ---------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Recent returns were achieved during
favorable market conditions. They do not take into account any adjustment
for taxes payable on reinvested distributions. Returns for class A and
class M shares reflect the current maximum initial sales charges of 5.75%
and 3.50%, respectively. Class B share returns for the 1-, 5-, and 10-year
(where available) and life-of-fund periods reflect the applicable
contingent deferred sales charge (CDSC), which is 5% in the first year,
declines to 1% in the sixth year, and is eliminated thereafter. Returns
shown for class M shares for periods prior to their inception are derived
from the historical performance of class A shares, adjusted to reflect the
initial sales charge or CDSC, if any, currently applicable to class M
shares and the higher operating expenses. For class C shares, returns for
periods prior to their inception are derived from the historical
performance of class A shares, adjusted to reflect both the CDSC currently
applicable to class C shares, which is 1% for the first year and is
eliminated thereafter, and the higher operating expenses applicable to
class C shares. All returns assume reinvestment of distributions at NAV.
Investment return and principal value will fluctuate so that an investor's
shares when redeemed may be worth more or less than their original cost.
<TABLE>
<CAPTION>
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 7/1/94
MSCI
Fund's class A Standard & Poor's MSCI EAFE All-Country Consumer Price
Date shares at POP 500 Index Index World Index Index
<S> <C> <C> <C> <C> <C>
7/1/94 9,425 10,000 10,000 10,000 10,000
2/28/95 9,812 11,179 9,500 10,074 10,203
2/29/96 12,813 15,058 11,101 12,368 10,480
2/28/97 14,980 18,997 11,460 14,074 10,797
2/28/98 19,136 25,647 13,234 17,100 10,953
2/28/99 21,638 30,709 13,889 18,961 11,135
2/29/2000 $35,299 $34,311 $17,423 $23,072 $11,486
</TABLE>
Footnote reads:
Past performance is no assurance of future results. At the end of the same
time period, a $10,000 investment in the fund's class B shares would have
been valued at $36,238 ($36,138 at CDSC); a $10.000 investment in the
fund's class C shares would have been valued at $36,165 and no contingent
deferred sales charges would apply; a $10,000 investment in the fund's
class M shares would have been valued at $36,768 ($35,477 at public
offering price). See first page of performance section for performance
calculation method.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 2/29/00
Class A Class B Class C Class M
- ------------------------------------------------------------------------------
Distributions (number) 1 1 1 1
- ------------------------------------------------------------------------------
Income $0.271 $0.175 $0.249 $0.211
- ------------------------------------------------------------------------------
Capital gains
Long-term 0.487 0.487 0.487 0.487
- ------------------------------------------------------------------------------
Short-term 1.895 1.895 1.895 1.895
- ------------------------------------------------------------------------------
Total $2.653 $2.557 $2.631 $2.593
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- ------------------------------------------------------------------------------
2/28/99 $13.62 $14.45 $13.40 $13.63 $13.48 $13.97
- ------------------------------------------------------------------------------
2/29/00 19.32 20.50 18.92 19.20 19.07 19.76
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 3/31/00 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (7/1/94) (7/1/94) (2/1/99) (7/3/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 59.20% 50.01% 58.13% 53.13% 58.19% 57.19% 58.58% 53.03%
- -----------------------------------------------------------------------------------------
5 years 258.15 237.58 247.41 245.41 247.01 247.01 251.70 239.32
Annual average 29.07 27.55 28.28 28.13 28.25 28.25 28.60 27.68
- -----------------------------------------------------------------------------------------
Life of fund 281.37 259.38 268.71 267.71 268.06 268.06 274.04 260.91
Annual average 26.21 24.92 25.47 25.41 25.44 25.44 25.79 25.01
- -----------------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns may be more or
less than those shown. They do not take into account any adjustment for taxes payable on
reinvested distributions. Investment returns and principal value will fluctuate so that
an investor's shares when sold may be worth more or less than their original cost.
See first page of performance section for performance calculation method.
</TABLE>
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are subject
to a contingent deferred sales charge only if the shares are redeemed
during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B or C shares and assumes redemption at the end of
the period. Your fund's class B CDSC declines from a 5% maximum during the
first year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies. The CDSC for class C shares is 1% for one year after
purchase.
Comparative benchmarks
Standard & Poor's 500 Index* is an unmanaged list of common stocks whose
performance assumes reinvestment of all distributions. It is frequently
used as a general measure of stock market performance.
Europe, Australasia, and Far East (EAFE)* component of Morgan Stanley
Capital International (MSCI) World Index is an unmanaged list of
approximately 1,045 equity securities originating in 18 countries listed
on the stock exchanges of Europe, Australasia, and the Far East, with all
values expressed in U.S. dollars. Performance figures reflect changes in
market prices and reinvestment of distributions net of withholding
taxes.
Morgan Stanley Capital International (MSCI) All-Country World Index* is an
unmanaged list of global equity securities, with all values expressed in
U.S. dollars.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
*Securities indexes assume reinvestment of all distributions and interest
payments and do not take into account brokerage fees or taxes. Securities
in the fund do not match those in the indexes and performance of the fund
will differ. It is not possible to invest directly in an index.
A guide to the financial statements
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, country, or state to show areas of concentration
and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the sources listed in the Statement of operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also
includes the current reporting period. For open-end funds, a separate
table is provided for each share class.
Report of independent accountants
For the fiscal year ended February 29, 2000
To the Trustees and Shareholders of
Putnam Global Equity Fund
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of Putnam Global Equity
Fund (formerly Putnam Diversified Equity Trust) (the "fund") at February
29, 2000, and the results of its operations, the changes in its net assets
and the financial highlights for the periods indicated, in conformity with
accounting principles generally accepted in the United States. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the fund's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements
in accordance with auditing standards generally accepted in the United
States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of investments owned at February 29, 2000 by correspondence
with the custodian, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 10, 2000
<TABLE>
<CAPTION>
The fund's portfolio
February 29, 2000
COMMON STOCKS (98.7%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Airlines (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
71,039 Deutsche Lufthansa AG (Germany) $ 1,590,834
Automotive (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
757,684 Investor AB (Sweden) 11,106,174
Banking (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
319,100 Bank of New York Company, Inc. 10,630,019
38,586 Credit Suisse Group (Switzerland) 6,171,064
--------------
16,801,083
Broadcasting (7.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,110,225 Carlton Communications Plc (United Kingdom) 12,554,984
289,100 CBS Corp. (NON) 17,219,519
80,900 Grupo Televisa S.A.GDR (Mexico) (NON) 6,214,131
477,190 Mediaset SpA (Italy) 11,622,344
18,010 Nippon Television Network Corp. (Japan) 24,879,760
140,507 ProSieben Media AG (Germany) 20,098,402
9,777 Television Francaise I (TF1) (France) 6,378,393
--------------
98,967,533
Cable Television (4.7%)
- --------------------------------------------------------------------------------------------------------------------------
574,638 AT&T Corp. - Liberty Media Group Class A (NON) 30,024,836
69,500 Adelphia Communications Corp. 3,818,156
202,800 Comcast Corp. Class A 8,619,000
297,400 MediaOne Group Inc. 23,345,900
--------------
65,807,892
Chemicals (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
11 Celanese AG (Germany) (NON) 219
231,150 Monsanto Co. 8,971,509
87,300 Rohm & Haas Co. 3,524,738
--------------
12,496,466
Commercial and Consumer Services (2.6%)
- --------------------------------------------------------------------------------------------------------------------------
33,921 Havas Advertising S.A. (France) 18,359,402
11,200 Publicis S.A. (France) 5,726,319
12,000 Trans Cosmos, Inc. (Japan) 5,583,932
357,952 WPP Group Plc (United Kingdom) 6,905,743
--------------
36,575,396
Communications Equipment (6.2%)
- --------------------------------------------------------------------------------------------------------------------------
33,000 Cisco Systems, Inc. (NON) 4,362,188
127,500 Corning Inc. 23,970,000
27,600 Juniper Networks, Inc. (NON) 7,571,025
133,243 Nokia Oyj AB Class A, (Finland) 26,657,327
261,199 Telefonaktiebolaget LM Ericsson Class B, (Sweden) 25,095,731
--------------
87,656,271
Computers (4.2%)
- --------------------------------------------------------------------------------------------------------------------------
374,200 Dell Computer Corp. (NON) 15,272,038
95,000 Lexmark International Group, Inc. Class A (NON) 11,328,750
707,000 NEC Corp. (Japan) 15,774,652
175,300 Sun Microsystems, Inc. (NON) 16,697,325
--------------
59,072,765
Conglomerates (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
505,000 Sumitomo Corp. (Japan) 5,590,203
88,535 Vivendi (France) 10,439,427
--------------
16,029,630
Consumer (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
112,300 Sony Corp. (Japan) 33,170,498
Consumer Goods (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
215,600 Kimberly-Clark Corp. 11,143,825
Consumer Services (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
66,853 TPI Paginas Amarillas 144A (Spain) (NON) 4,587,553
168,500 Young & Rubicam, Inc. 8,509,250
--------------
13,096,803
Consumer Staples (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
682,489 Diageo Plc (United Kingdom) 5,211,758
Electrical Equipment (3.3%)
- --------------------------------------------------------------------------------------------------------------------------
625,000 Furukawa Electric Co., Ltd. (The) (Japan) 9,537,172
469,700 Rockwell International Corp. 21,253,925
87,208 Siemens AG (Germany) 15,635,152
--------------
46,426,249
Electronics (8.1%)
- --------------------------------------------------------------------------------------------------------------------------
6,700 Advantest Corp. (Japan) 1,212,978
157,800 Altera Corp. (NON) 12,584,550
228,000 Intel Corp. 25,764,000
91,100 Kyocera Corp. (Japan) 15,416,541
269,300 LSI Logic Corp. (NON) 17,252,031
225,900 Motorola, Inc. 38,515,950
4,215 Swatch Group AG (The) (Switzerland) 4,554,973
--------------
115,301,023
Energy (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
139,600 Schlumberger Ltd. 10,312,950
Engineering & Construction (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
15,655 Bouygues S.A. (France) 13,087,932
Entertainment (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
238,700 Viacom, Inc. Class B (NON) 13,307,525
Financial (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
90,078 American Express Co. 12,087,342
288,329 Citigroup, Inc. 14,903,005
775 Julius Baer Holdings AG (Switzerland) 2,390,217
--------------
29,380,564
Food (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
4,124 Nestle S.A. (Switzerland) 6,988,020
Insurance (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
130,000 American General Corp. 6,784,375
49,600 American International Group, Inc. 4,386,500
171,640 Internationale Nederlanden Groep (ING) (Netherlands) 8,712,546
--------------
19,883,421
Investment Banking/Brokerage (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
1,821,000 Nikko Securities Co. Ltd. (Japan) 23,451,395
193,000 Nomura Securities Co. Ltd. (Japan) 5,437,608
67,400 Merrill Lynch & Co., Inc. 6,908,500
178,800 Morgan Stanley, Dean Witter, Discover and Co. 12,594,225
--------------
48,391,728
Lodging/Tourism (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,714,970 Granada Group Plc (United Kingdom) 17,281,019
Machinery (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
75,100 Fuji Machine Manufacturing Co., Ltd. (Japan) 4,962,074
70,900 THK Co., Ltd. (Japan) 3,125,193
--------------
8,087,267
Medical Technology (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
62,700 PE Corp.-PE Biosystems Group 6,614,850
Oil & Gas (3.3%)
- --------------------------------------------------------------------------------------------------------------------------
43,300 Exxon Mobil Corp. 3,261,031
175,200 Royal Dutch Petroleum Co. Plc ADR (Netherlands) 9,198,000
2,075,175 Shell Transport & Trading Co. Plc (United Kingdom) 14,273,649
150,041 Total S.A. Class B, (France) 19,939,511
--------------
46,672,191
Paper & Forest Products (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
115,000 Sealed Air Corp. (NON) 5,714,063
Pharmaceuticals (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
3,362 Ares-Serono Group Class B, (Switzerland) 10,935,968
674 Roche Holdings AG (Switzerland) 7,299,874
218,552 Sanofi-Synthelabo SA (France) (NON) 8,447,108
--------------
26,682,950
Real Estate (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
851,000 Cheung Kong Infrastructure Holdings (Hong Kong) 11,317,798
Retail (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
12,800 Bulgari S.P.A. (Italy) 117,504
30 Circle K Japan Co. Ltd. (Japan) 1,142
50,538 Gucci Group N.V. (Netherlands) 4,418,916
12,000 Ito-Yokado Co., Ltd. (Japan) 697,991
118,700 Kojima Co Ltd. (Japan) 3,462,937
350,700 TJX Cos., Inc. (The) 5,589,281
245,600 Tandy Corp. 9,348,150
--------------
23,635,921
Semiconductor (2.2%)
- --------------------------------------------------------------------------------------------------------------------------
159,113 Applied Materials, Inc. (NON) 29,107,734
56,300 St Assembly Test Service Ltd. (Singapore) (NON) 2,702,400
--------------
31,810,134
Software (7.3%)
- --------------------------------------------------------------------------------------------------------------------------
61,800 Adobe Systems, Inc. 6,303,600
46,100 BEA Systems, Inc. (NON) 5,834,531
81,700 Computer Associates International, Inc. 5,254,331
257,749 Microsoft Corp. (NON) 23,036,317
559,900 Oracle Corp. (NON) 41,572,575
12,442 SAP AG Systeme Preference Bearer (Germany) 10,431,855
56,100 VERITAS Software Corp. (NON) 11,100,788
--------------
103,533,997
Technology (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
153,180 Philips Electronics N.V. (Netherlands) 28,462,318
Technology Services (3.9%)
- --------------------------------------------------------------------------------------------------------------------------
55,300 China.com Corp. (Hong Kong) (NON) 6,794,988
361,700 Electronic Data Systems Corp. 23,420,075
12,821 Framtidsfabriken AB (Sweden) (NON) 3,024,513
900 Framtidsfabriken AB 144A (Sweden) (NON) 212,313
253,200 Lycos, Inc. 15,097,050
2,156,000 Pacific Century CyberWorks Ltd. (Hong Kong) (NON) 6,136,412
--------------
54,685,351
Telecommunications (12.6%)
- --------------------------------------------------------------------------------------------------------------------------
179,671 BCE, Inc. (Canada) 19,571,195
1,380,203 Cable & Wireless Plc (United Kingdom) 28,665,588
83,760 Covad Communications Group 144A (NON) 7,559,340
77,275 France Telecom S.A. (France) 12,509,953
383,400 Global TeleSystems Group, Inc. (NON) 9,585,000
34,200 Helsingin Puhelin Oyj (Helsinki Telephone Corp.)
Class E, (Finland) 3,669,027
103,500 Jazztel Plc (United Kingdom) (NON) 12,187,125
80,625 NTL Inc. (NON) 7,377,188
803,227 Telecom Italia Mobile SpA (Italy) 10,984,912
221,200 Telefonos de Mexico S.A. ADR Class L, (Mexico) 14,543,900
5 Telesp Participacoes S.A. (Brazil) 165
72,039 United Pan-Europe NV (Netherlands) 14,248,898
6,864,305 Vodafone Group Plc (United Kingdom) 38,514,369
--------------
179,416,660
Telephone (4.8%)
- --------------------------------------------------------------------------------------------------------------------------
1,889,000 China Telecom Ltd. (Hong Kong) 17,355,216
20,712 HPY Holding Oyj (Finland) (NON) 972,882
4 KDD Corp. (Japan) 373
730 NTT Mobile Communications (Luxembourg) 29,391,075
466,296 Telecom Italia SpA (Italy) 8,206,793
422,805 Telefonica S.A. (Spain) (NON) 12,197,935
--------------
68,124,274
Tobacco (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
2,524 Cie Finance Richemont (Switzerland) 5,853,503
Toys (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
24,800 Nintendo Co. Ltd. (Japan) 5,407,180
Transaction Processing (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
40,200 CheckFree Holdings Corp. (NON) 3,535,088
--------------
Total Common Stocks (cost $991,575,766) $1,398,640,904
UNITS (0.5%) (a) (cost $6,274,331)
NUMBER OF UNITS VALUE
- --------------------------------------------------------------------------------------------------------------------------
858,600 Taiwan Semiconductor Manufacturing Co., Structured Note
(issued by UBS AG Warburg Dillon Read) 3.0%, 2000
(Taiwan) $ 7,010,641
SHORT-TERM INVESTMENTS (1.2%) (a) (cost $16,548,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$16,548,000 Interest in $702,686,000 joint repurchase agreement
dated February 29, 2000 with Morgan (J.P.) & Co., Inc.
due March 1, 2000 with respect to various U.S. Treasury
obligations -- maturity value of $16,550,648 for an effective
yield of 5.76% $ 16,548,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,014,398,097) (b) $1,422,199,545
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,417,704,315.
(b) The aggregate identified cost on a tax basis is $1,033,843,237, resulting in gross unrealized appreciation and
depreciation of $427,563,042 and $39,206,734, respectively, or net unrealized appreciation of $388,356,308.
(NON) Non-income-producing security.
144A after the name of a security represents those exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers.
ADR or GDR after the name of a foreign holding stands for American Depositary Receipts or Global Depositary
Receipts, respectively, representing ownership of foreign securities on deposit with a custodian bank.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at February 29, 2000: (as percentage of Market Value)
Canada 1.4%
Finland 2.2
France 6.7
Germany 3.3
Hong Kong 2.9
Italy 2.2
Japan 11.1
Luxembourg 2.0
Mexico 1.4
Netherlands 4.6
Spain 1.2
Sweden 2.8
Switzerland 3.1
United Kingdom 9.6
United States 45.3
Other 0.2
-----
Total 100.0%
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
February 29, 2000
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,014,398,097) (Note 1) $1,422,199,545
- -----------------------------------------------------------------------------------------------
Cash 195
- -----------------------------------------------------------------------------------------------
Dividends and other receivables 1,149,666
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 4,384,991
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 52,562,473
- -----------------------------------------------------------------------------------------------
Total assets 1,480,296,870
Liabilities
- -----------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 281,231
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 55,762,140
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 2,693,242
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,969,107
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 244,080
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 23,484
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,913
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,464,542
- -----------------------------------------------------------------------------------------------
Other accrued expenses 151,816
- -----------------------------------------------------------------------------------------------
Total liabilities 62,592,555
- -----------------------------------------------------------------------------------------------
Net assets $1,417,704,315
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $927,952,812
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (16,292,315)
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 98,260,030
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 407,783,788
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,417,704,315
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($623,649,393 divided by 32,277,658 shares) $19.32
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $19.32)* $20.50
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($709,891,332 divided by 37,516,410 shares)** $18.92
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($25,538,852 divided by 1,329,831 shares)** $19.20
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($58,624,738 divided by 3,074,517 shares) $19.07
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $19.07)* $19.76
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended February 29, 2000
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $724,560) $ 9,523,874
- -----------------------------------------------------------------------------------------------
Interest 378,619
- -----------------------------------------------------------------------------------------------
Total investment income 9,902,493
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 6,178,098
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,664,413
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 26,955
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 13,868
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,314,357
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 4,927,452
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 87,435
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 301,742
- -----------------------------------------------------------------------------------------------
Reports to shareholders 59,274
- -----------------------------------------------------------------------------------------------
Registration fees 96,760
- -----------------------------------------------------------------------------------------------
Auditing 50,105
- -----------------------------------------------------------------------------------------------
Legal 9,941
- -----------------------------------------------------------------------------------------------
Postage 121,596
- -----------------------------------------------------------------------------------------------
Other 104,849
- -----------------------------------------------------------------------------------------------
Total expenses 14,956,845
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (177,567)
- -----------------------------------------------------------------------------------------------
Net expenses 14,779,278
- -----------------------------------------------------------------------------------------------
Net investment loss (4,876,785)
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 207,046,667
- -----------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (223,528)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (Note 1) (462,493)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 296,995,237
- -----------------------------------------------------------------------------------------------
Net gain on investments 503,355,883
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $498,479,098
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended Year ended
February 29 February 28
2000 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment loss $ (4,876,785) $ (1,365,696)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 206,823,139 84,241,208
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments and assets and liabilities in foreign currencies 296,532,744 (3,737,132)
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 498,479,098 79,138,380
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
In excess of net investment income
Class A (7,131,495) --
- ---------------------------------------------------------------------------------------------------------------
Class B (5,510,486) --
- ---------------------------------------------------------------------------------------------------------------
Class C (199,314) --
- ---------------------------------------------------------------------------------------------------------------
Class M (545,209) --
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (62,683,472) (26,234,811)
- ---------------------------------------------------------------------------------------------------------------
Class B (75,005,590) (33,206,052)
- ---------------------------------------------------------------------------------------------------------------
Class C (1,906,687) --
- ---------------------------------------------------------------------------------------------------------------
Class M (6,154,919) (2,470,012)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 368,846,631 62,966,169
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 708,188,557 80,193,674
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 709,515,758 629,322,084
- ---------------------------------------------------------------------------------------------------------------
End of year (including distributions in excess of
net investment income and accumulated
net investment loss of $16,292,315 and
$359,190, respectively) $1,417,704,315 $709,515,758
- ---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
Per-share Year ended Year ended
operating performance Feb. 29 Year ended February 28 Feb. 29
- ---------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.62 $13.18 $11.85 $11.02 $8.83
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.02)(c) .02(c) .03(c) .06(c) .06
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 8.37 1.66 3.06 1.77 2.60
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 8.35 1.68 3.09 1.83 2.66
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- (.05) (.12) (.08)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (2.38) (1.24) (1.66) (.83) (.39)
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income (.27) -- (.05) (.05) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.65) (1.24) (1.76) (1.00) (.47)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $19.32 $13.62 $13.18 $11.85 $11.02
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 63.14 13.08 27.74 16.92 30.58
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $623,649 $302,556 $270,536 $199,305 $142,513
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.20 1.26 1.37 1.43 1.56
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.14) .17 .20 .48 .60
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 209.44 241.46 97.77 82.07 72.00
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through brokerage service and expense offset arrangements.
(Note 2).
(c) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ----------------------------------------------------------------------------------------------------------------------------------
Per-share Year ended Year ended
operating performance Feb. 29 Year ended February 28 Feb. 29
- ----------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.40 $13.07 $11.77 $10.97 $8.80
- ----------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.13)(c) (.07)(c) (.06)(c) (.01)(c) .01
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 8.21 1.64 3.05 1.76 2.60
- ----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 8.08 1.57 2.99 1.75 2.61
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- (.01) (.09) (.05)
- ----------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (2.38) (1.24) (1.66) (.83) (.39)
- ----------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income (.18) -- (.02) (.03) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.56) (1.24) (1.69) (.95) (.44)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.92 $13.40 $13.07 $11.77 $10.97
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 62.03 12.33 26.98 16.19 30.05
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $709,891 $377,386 $333,642 $232,117 $150,679
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.88 1.92 2.00 2.02 2.09
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.81) (.49) (.44) (.12) .05
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 209.44 241.46 97.77 82.07 72.00
- ----------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through brokerage service and expense offset arrangements.
(Note 2).
(c) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Year ended Feb. 1, 1999+
operating performance Feb. 29 to Feb. 28
- ---------------------------------------------------------------------------------------------------------------------------------
2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $13.63 $14.15
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(c) (.13) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 8.33 (.52)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 8.20 (.52)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- --
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (2.38) --
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income (.25) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.63) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $19.20 $13.63
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 61.94 (3.68)*
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $25,539 $190
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.88 .15*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (1.04) (.05)*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 209.44 241.46
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through brokerage service and expense offset arrangements.
(Note 2).
(c) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ---------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Year ended July 3, 1995+
operating performance Feb. 29 Year ended February 28 to Feb. 29
- ---------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.48 $13.11 $11.80 $11.01 $9.76
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(c) (.09) (.03) (.03) .01 --
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 8.27 1.64 3.07 1.78 1.72
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 8.18 1.61 3.04 1.79 1.72
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- (.03) (.12) (.08)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (2.38) (1.24) (1.66) (.83) (.39)
- ---------------------------------------------------------------------------------------------------------------------------------
In excess of net
investment income (.21) -- (.04) (.05) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.59) (1.24) (1.73) (1.00) (.47)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $19.07 $13.48 $13.11 $11.80 $11.01
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 62.48 12.61 27.36 16.51 17.95*
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $58,625 $29,384 $25,145 $14,791 $3,901
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.63 1.67 1.75 1.77 1.23*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.56) (.25) (.22) .05 --*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 209.44 241.46 97.77 82.07 72.00
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through brokerage service and expense offset arrangements.
(Note 2).
(c) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
Notes to financial statements
February 29, 2000
Note 1
Significant accounting policies
Putnam Global Equity Fund (formerly known as Putnam Diversified Equity
Trust) ("the fund") is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment
company. The fund seeks capital appreciation primarily through a
diversified portfolio of growth and value stocks issued by companies
worldwide.
The fund offers class A, class B, class C, and class M shares. Class A
shares are sold with a maximum front-end sales charge of 5.75%. Class B
shares, which convert to class A shares after approximately eight years,
do not pay a front-end sales charge but pay a higher ongoing distribution
fee than class A shares, and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class C
shares are subject to the same fees and expenses as class B shares, except
that class C shares have a one-year 1.00% contingent deferred sales charge
and do not convert to class A shares. Class M shares are sold with a
maximum front end sales charge of 3.50% and pay an ongoing distribution
fee that is higher than class A shares but lower than class B and class C
shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if that fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally
accepted accounting principles and requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period.
Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sales price on its principal exchange, or if no sales are
reported -- as in the case of some securities traded over-the-counter --
the last reported bid price. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost, which
approximates market value. Other investments, including restricted
securities, are stated at fair value following procedures approved by the
Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
manager, a wholly-owned subsidiary of Putnam Investments, Inc. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the market
value of which at the time of purchase is required to be in an amount at
least equal to the resale price, including accrued interest. Collateral
for certain tri-party purchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to the
resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Gains or losses on securities sold are determined on
the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The fund
does not isolate that portion of realized or unrealized gains or losses
resulting from changes in the foreign exchange rate on investments from
fluctuations arising from changes in the market prices of the securities.
Such gains and losses are included with the net realized and unrealized
gain or loss on investments. Net realized gains and losses on foreign
currency transactions represent net realized exchange gains or losses on
closed forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized appreciation
and depreciation of assets and liabilities in foreign currencies arise
from changes in the value of open forward currency contracts and assets
and liabilities other than investments at the period end, resulting from
changes in the exchange rate. Investments in foreign securities involve
certain risks, including those related to economic instability,
unfavorable political developments, and currency fluctuations, not present
with domestic investments.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a decline
in value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the
value of a currency in which securities a fund intends to buy are
denominated, when a fund holds cash reserves and short-term investments).
The U.S. dollar value of forward currency contracts is determined using
current forward currency exchange rates supplied by a quotation service.
The market value of the contract will fluctuate with changes in currency
exchange rates. The contract is "marked to market" daily and the change in
market value is recorded as an unrealized gain or loss. When the contract
is closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. The fund could be exposed to risk if
the value of the currency changes unfavorably, if the counterparties to
the contracts are unable to meet the terms of their contracts or if the
fund is unable to enter into a closing position.
G) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the year ended
February 29, 2000, the fund had no borrowings against the line of credit.
H) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
I) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences include temporary and permanent differences of losses on wash
sales, foreign currency gains and losses, post-October loss deferrals,
organization costs, foreign taxes, realized and unrealized gains and
losses on passive foreign investment companies. Reclassifications are made
to the fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryovers) under income tax
regulations. For the year ended February 29, 2000, the fund reclassified
$2,330,164 to decrease distributions in excess of net investment income
and $48,676 to increase paid-in-capital, with a decrease to accumulated
net realized gains and losses of $2,378,840. The calculation of net
investment income per share in the financial highlights table excludes
these adjustments.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
Such fee is based on the following annual rates: 0.70% of the first $500
million of average net assets, 0.60% of the next $500 million, 0.55% of
the next $500 million, 0.50% of the next $5 billion, 0.475% of the next $5
billion, 0.455% of the next $5 billion, 0.44% of the next $5 billion, and
0.43% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
Under the subcustodian contract between the subcustodian bank and PFTC,
the subcustodian bank has a lien on the securities of the fund to the
extent permitted by the fund's investment restrictions to cover any
advances made by the subcustodian bank for the settlement of securities
purchased by the fund. At February 29, 2000, the payable to the
subcustodian bank represents the amount due for cash advanced for the
settlement of a security purchased.
For the year ended February 29, 2000, fund expenses were reduced by
$177,567 under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the
Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $1,681
has been allocated to the fund, and an additional fee for each Trustees
meeting attended. Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and meeting
fees for the three years preceding retirement. Pension expense for the
fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B, class C and class M shares pursuant to Rule 12b-1 under
the Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam
Investments Inc., for services provided and expenses incurred by it in
distributing shares of the fund. The Plans provide for payments by the
fund to Putnam Mutual Funds Corp. at an annual rate up to 0.65%, 1.00%,
1.00% and 1.00% of the average net assets attributable to class A, class
B, class C and class M shares, respectively. The Trustees currently limit
payment by the fund to an annual rate of 0.75% of the average net assets
attributable to class M shares. The Trustees currently limit payment by
the fund to an annual rate of 0.50% of the average net assets attributable
to class A for shares outstanding as of July 1, 1995 (except for class A
shares for which Putnam Mutual Funds is dealer of record) and 0.25% of
such average net asset value of shares acquired after that date (including
shares acquired through reinvestment of distributions).
For the year ended February 29, 2000 Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $325,496 and $30,433 from the sale
of class A and class M shares, respectively, and received $401,297 and
$2,344 in contingent deferred sales charges from redemptions of class B
and class C shares, respectively. A deferred sales charge of up to 1% is
assessed on certain redemptions of class A shares. For the year ended
February 29, 2000, Putnam Mutual Funds Corp., acting as underwriter
received $40,029 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended February 29, 2000, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $2,196,482,132 and $1,985,940,187, respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Capital shares
At February 29, 2000, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended February 29, 2000
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 12,675,186 $210,179,037
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,751,173 66,317,672
- -----------------------------------------------------------------------------
16,426,359 276,496,709
Shares
repurchased (6,360,750) (102,861,869)
- -----------------------------------------------------------------------------
Net increase 10,065,609 $173,634,840
- -----------------------------------------------------------------------------
Year ended February 28, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 6,334,545 $86,668,517
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,863,995 24,474,124
- -----------------------------------------------------------------------------
8,198,540 111,142,641
Shares
repurchased (6,508,215) (87,307,056)
- -----------------------------------------------------------------------------
Net increase 1,690,325 $23,835,585
- -----------------------------------------------------------------------------
Year ended February 29, 2000
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 14,489,703 $233,678,478
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,386,814 76,023,532
- -----------------------------------------------------------------------------
18,876,517 309,702,010
Shares
repurchased (9,514,225) (151,240,623)
- -----------------------------------------------------------------------------
Net increase 9,362,292 $158,461,387
- -----------------------------------------------------------------------------
Year ended February 28, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 7,834,152 $106,056,611
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,419,026 31,277,908
- -----------------------------------------------------------------------------
10,253,178 137,334,519
Shares
repurchased (7,619,210) (101,800,083)
- -----------------------------------------------------------------------------
Net increase 2,633,968 $ 35,534,436
- -----------------------------------------------------------------------------
Year ended February 29, 2000
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,309,209 $21,775,089
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 110,915 1,951,003
- -----------------------------------------------------------------------------
1,420,124 23,726,092
Shares
repurchased (104,211) (1,793,768)
- -----------------------------------------------------------------------------
Net increase 1,315,913 $21,932,324
- -----------------------------------------------------------------------------
For the period February 1, 1999
(commencement of operations)
to February 28, 1999
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 13,918 $191,352
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
13,918 191,352
Shares
repurchased -- --
- -----------------------------------------------------------------------------
Net increase 13,918 $191,352
- -----------------------------------------------------------------------------
Year ended February 29, 2000
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 955,414 $15,199,431
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 376,318 6,570,256
- -----------------------------------------------------------------------------
1,331,732 21,769,687
Shares
repurchased (436,643) (6,951,607)
- -----------------------------------------------------------------------------
Net increase 895,089 $14,818,080
- -----------------------------------------------------------------------------
Year ended February 28, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 570,399 $7,693,217
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 185,652 2,412,397
- -----------------------------------------------------------------------------
756,051 10,105,614
Shares
repurchased (495,014) (6,700,818)
- -----------------------------------------------------------------------------
Net increase 261,037 $3,404,796
- -----------------------------------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund
hereby designates $56,145,225 as capital gain, for its taxable year ended
February 29, 2000.
For the period, interest and dividends from foreign countries were
$6,931,437. Taxes paid to foreign countries were $724,560 or $0.01 (for
all classes of shares).
The fund has designated 2.00% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The Form 1099 you receive in January 2001 will show the tax status of all
distributions paid to your account in calendar 2000.
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds. Please call
your financial advisor or Putnam at 1-800-225-1581 to obtain a prospectus for
any Putnam fund. It contains more complete information, including charges and
expenses. Please read it carefully before you invest or send money.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Century Growth Fund [DBL. DAGGER]
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund *
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund **
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK] **
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
Fund information
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
Thomas V. Reilly
Vice President
Paul C. Warren
Vice President and Fund Manager
Justin M. Scott
Vice President and Fund Manager
Michael Stack
Vice President and Fund Manager
Omid Kamshad
Vice President and Fund Manager
Michael K. Arends
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam Global Equity
Fund. It may also be used as sales literature when preceded or accompanied
by the current prospectus, which gives details of sales charges,
investment objectives, and operating policies of the fund, and the most
recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site: www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
AN003-59728 4/00
